Caterpillar Drives Down Expectations for 2020 -- Update
31 Januar 2020 - 3:02PM
Dow Jones News
By Austen Hufford
Caterpillar Inc. said it expects demand for its machinery to
fall this year, widening a performance gap between some
manufacturers and an otherwise robust U.S. economy.
The maker of equipment for mining companies and builders around
the world said Friday that global economic uncertainty crimped
sales in the latest quarter as companies held off on big purchases.
Revenue in 2019 was 1.7% lower than a year earlier, and Caterpillar
said it expected another decline in 2020.
"A lot of people have been deferring making capital decisions,"
Andrew Bonfield, Caterpillar's financial chief, said in an
interview.
The company's shares fell 1% in premarket trading Friday.
Cost reductions helped offset lower demand in Caterpillar's
latest quarter. Adjusted profit per share rose 3.1% as the company
reduced production and hired fewer temporary workers.
Caterpillar joined a chorus of manufacturers saying they expect
sluggish conditions to carry into 2020. Lingering trade tensions,
Boeing Co.'s idled 737 MAX production lines and the coronavirus
outbreak in China all threaten to extend a rough patch for U.S.
factories.
3M Co.'s Chief Executive Mike Roman said this week that he
expects the conglomerate's sales to other manufacturers to lag
sales to consumers this year. The maker of an array of products
from electrical tape to molar crowns is planning a second round of
layoffs in less than a year as part of a global restructuring.
"The industrial-production-related businesses are a little lower
growth, " Mr. Roman said in an interview.
DuPont de Nemours Inc., which makes nylon and other materials,
and paint company PPG Industries Inc. both said lower industrial
demand would weigh on business this year as well. Conglomerate
Honeywell International Inc. on Friday reported lower-than-expected
sales for the fourth quarter.
The U.S. manufacturing sector contracted for five straight
months through December, according to the Institute for Supply
Management. New orders for so-called core capital goods, which
excludes aircraft and defense orders , were largely flat in 2019,
according to the Commerce Department.
"Customers up and down the supply chain remain hesitant to spend
in the face of uncertainty," Andrew Silvernail, chief executive of
pump-and-valve maker IDEX Corp., told investors on Thursday.
Still, manufacturing drives just about a 10th of the economy,
and other sectors are performing better. Consumer confidence is
strong, unemployment is at the lowest level in half a century and
incomes are rising. Gross domestic product grew 2.3% last year, the
Commerce Department said Thursday.
Caterpillar, which sells its construction and mining machines to
customers in 193 countries, is widely viewed as a barometer for
global industrial vigor.
The company, which makes its sales through a network of
independent dealers, said it expects revenue to decline this year
as demand from companies that buy its machines falls between 4% and
9%.
In North America, Caterpillar said it expects construction
activity to decline and demand from oil-and-gas customers to remain
weak.
The Deerfield, Ill.-based company said machinery sales fell 14%
in North America, 16% in Latin America and 6% in its Europe, Africa
and Middle East region for the fourth quarter from a year earlier.
Sales in Asia were flat for the quarter.
The coronavirus outbreak in China poses a new threat to
businesses operating in the country. Many factories have extended
closures planned over the Lunar New Year holiday as people avoid
travel.
Caterpillar said it is delaying opening some facilities in China
by up to a week, and that its factories in China aren't in parts of
the country most affected by the outbreak.
Caterpillar said total revenue, which includes financial
services, declined 8.4% for the quarter to $13.14 billion as net
income rose 4.8% to $1.1 billion. Adjusted profit per share rose
3.1% to $2.63 in the fourth quarter.
Amber Burton contributed to this article.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
January 31, 2020 08:47 ET (13:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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